The influence of foreign institutional investors, institutional directors, and the share pledge ratio of directors on financial performance of tourism firms

Abstract

Corporate governance is a critical component relevant to firm performance. In the tourism sector, corporate governance is an underexamined issue. The purpose of the current study is to bridge this gap by examining the influence of foreign institutional investors, institutional directors, and shares pledged by directors on tourism firms’ financial performance. Data are derived from listed tourism firms in Taiwan. Ordinary least square regressions and two-stage least square regressions are used to examine the hypotheses. Results show that the presence of foreign institutional investors and a low share pledge ratio of directors have significant effects on return on assets and Tobin’s Q. The presence of institutional directors has a positive effect on Tobin’s Q. Implications for owners, policy makers, and investors are discussed.